iftttwall

Authored by Charles Hugh Smith via OfTwoMinds blog,

Once the shared memories of these values are lost, the Empire ceases to exist; there is nothing left to reform or renew.

Is renewal / recovery from systemic decline possible? The history of the Roman Empire is a potentially insightful place to start looking for answers. As long-time readers know, I've been studying both the Western and Eastern (Byzantine) Roman Empires over the past few years.

Both Western and Eastern Roman Empires faced existential crises that very nearly dissolved the empires hundreds of years before their terminal declines. The Western Roman Empire, beset by the overlapping crises of invasion, civil war, plague and economic upheaval, nearly collapsed in the third century C.E. (Christian Era, what was previously A.D.) — 235 to 284 C.E., fully two hundred years before its final dissolution in the fifth century (circa 476 C.E.).

Meanwhile, the Eastern Roman Empire (Byzantine Empire) faced similar crises in the seventh and eighth centuries, as its capital of Constantinople was besieged by the Persians in 626 C.E. and the Arab caliphate in 674 C.E. and again in 717 C.E. The invasions which preceded the sieges stripped the empire of wealthy territories and the income those lands produced.

In both cases, the Empire not only survived but recovered a substantial measure of its former resilience and stability. Fortune delivered strong leadership at the critical moment: leadership that was able to protect itself from petty, self-aggrandizing domestic rivals, force the reorganization of failed, self-serving bureaucracies, inspire the populace to make the necessary sacrifices for the common good, win decisive military victories that ended the threat of invasion, and generate a moral claim to leadership via personal rectitude and/or participation in a religious revival.

Absent such strong, stable, legitimate leadership, neither empire would have survived their existential crisis.

But strong leadership alone isn't enough. A strong military leader can win battles, and a strong political leader can aggregate power, but these are merely steps to the ultimate goal of strong leadership, which is to reform the Imperial system so it once again serves the needs of the entire Empire rather than just the greed of the few at the top of the wealth-power pyramid.

The system itself must still hold the potential to be reformed. If the systems of communication, trade, control and finance have all eroded beyond the point of no return, then the victories of a strong leader die with that leader.

The army must still have the means to recruit new legions, the Treasury must still have a system to collect tax revenues, the central leadership must have a way to communicate with far-flung commanders and local leaders, and so on.

The collective shared memory of imperial cohesion and competence must still exist in the general populace. Any political group identity, be it tribe, village, nation or empire, is anchored by a shared awareness of membership, i.e. the rights and responsibilities of belonging, and a collective memory of the group / empire as a functioning whole that served the many and not just the few.

Once the shared memory of the Empire as a functioning whole is lost, the entire notion of empire is lost.

The leadership in these existential crises of the third century C.E. in the West and the eighth century in the East could still draw upon a collective memory of a functioning empire. Residents had not yet lost the shared memory of serving in the army, of paying taxes, of stable trade protected by the Empire, of a stable Imperial currency, and so on.

Once the shared memories of these values are lost, the Empire ceases to exist; there is nothing left to reform or renew.

We are far down the road to a system that serves the few at the expense of the many. The collective memory of a system that once served the common good is fading. Strong leadership can still wrest popular political power from the self-serving elites atop the wealth-power pyramid and wield this political power to reform the system so it serves the many instead of just the few, but the window for such reform /renewal is closing fast.

In another decade, a living system that served the common good rather than just the interests of a few will be as distant as the shattered monuments of ancient Rome.

via http://ift.tt/2vCU2tP Tyler Durden

In a comment sure to stir up questions over dollar hegemony (and new world order conspiracy thoughts), IMF Managing Director Christine Lagarde admitted during an event today in Washington that The International Monetary Fund could be based in Beijing in a decade.

As Reuters reports, Lagarde said that such a move was "a possibility" because the Fund will need to increase the representation of major emerging markets as their economies grow larger and more influential.

"Which might very well mean, that if we have this conversation in 10 years' time…we might not be sitting in Washington, D.C. We'll do it in our Beijing head office," Lagarde said.

Lagarde's comments build on questions raised in May on The IMF's push for World Money… Yi Gang, the Deputy Governor of the People’s Bank of China disclosed to the IMF panel that,

“China has started reporting our foreign official reserves, balance of payment reports, and the international investment position reports.”

 

“All of these reports, now, in China are published in U.S dollars, SDR and Renminbi rates… I think that has the advantage of reducing the negative impact of negative liquidity on your assets.”

What that means in real terms is that China views the opportunity of being a part of the exclusive world money club as an opportunity to diversify away from the U.S dollar.

The Bank of China official took that message even further saying that he hopes that China could lead in world money operations by integrating it into the private sector.

“If more and more people, companies and the market use SDR as unit of accounts – that would generate more activity in the market with focus on the MSDR. [The hope would be] that they could create more products and market infrastructures that would be available for trade products to be denominated in SDR.”

The People’s Bank of China official referenced how this trend was already underway. Just last year Standard Chartered bank began to maintain accounts in SDR’s. “In terms of the first and secondary markets they will develop fairly well.”

Perhaps the most important segment that the Chinese official signaled was his reference that, “The Official Reserve SDR (OSDR) that allocation from the IMF is very important. [This allows] Central Banks to make the SDR an official asset, and easier for them to convert that asset into the reserve currency they need.”

What that means is that China will become an even greater player in the world money market.

Nomi Prins, an economist and historian stated when analyzing China’s economic positioning, “The expanding SDR basket is as much a political power play as it is about increasing the number of reserve currencies for central banks for financial purposes.”

*  *  *

As a reminder, the IMF's bylaws call for the institution's head office to be located in the largest member economy and since the IMF was launched in 1945, that has always been the United States, which currently has an effective veto over IMF decisions with a 16.5 percent share of its board votes.

But, as Reuters notes, economists estimate that China, with growth rates forecast above 6 percent, will likely overtake U.S. gross domestic product sometime over the next decade to become the world's largest economy in nominal terms.

 

Some, including the IMF, have argued that China already contributes more to global growth on a purchasing power parity basis, which adjusts for differences in prices.

The IMF last revised its quota system, or voting structure in 2010, but is set to launch another review next year.

Nothing lasts forever…

via http://ift.tt/2vCJXxh Tyler Durden

Several hours before the US stock market opened on Monday, the commodity world was shaken by an unexpected surge in crude options trades, with traders noting that “someone is either moving positions, blown up or getting out of commodities. MASSIVE amount of blocks going through in crude options.“

Someone is either moving positions, blown up or getting out of commodities. MASSIVE amount of blocks going through in #crude #options.#OOTT

— Mark Scullion (@mscullion) July 24, 2017

A Bloomberg alert shortly after confirmed the huge size of trades crossing the tape, when nearly $100 million in oil options traded simultaneously:

WTI crude oil options traded the equivalent of 48m bbl of contracts via block, according to data compiled by Bloomberg.

• Total value of all options combined is ~$99m
• Options include contracts from September 2017 through December 2020
• 5 largest blocks were: 4.4k Dec. $90 calls, 2.8k Dec. $60 calls, 2.5k Dec. $125 calls, 1.7k Dec. $95 calls, 1.4k Dec. $46 calls
• Click here for Excel detailing the value of each trade
• Trades all took place at 9:35am London time
• Contracts also traded with 9.6k lots of futures
• Similar trades also occurred on Brent in smaller volumes ~10:35am London time

As it turns out later, it wasn’t a fund liquidating, but Barclays selling the last part of its legacy oil book to an unidentified buyer, that triggered the surge in trading of exotic options most of which were written in the era of higher crude prices, Bloomberg reported this afternoon.

The size of the trade, which set traders on alert earlier, represented some 48 million barrels of contracts which “represents more than a quarter of the entire volume on an average trading day.”

Barclays announced that it was exiting its energy trading business altogether last December – which until that point had been housed in its macro-trading unit – when the British bank joined an exodus that analysts then said raised concern among oil producers that falling liquidity means they cannot use derivatives for their basic function: to hedge risk by locking in future prices. As Reuters reported at the time, the departure of Barclays exacerbated the scarcity of counterparties for trade when producers are trying to hedge their production for 2018 and beyond, potentially raising the cost to lock in that output. That increase, analysts speculated, could force some cash-strapped producers to forgo protection altogether, putting them at risk if the market takes another leg down.

One point of uncertainty in December was what Barclays was going to do with its trade book: at the time, analysts pointed out that Barclays could unwind hedges that it already conducted with market participants. The other option would be to sell the hedge book, thereby passing on any risk to another player.

This is precisely what happened on Monday, when Barclays’ transaction marked the final sale of the business.

A look at the derivatives that crossed the tape on Monday “were suggestive of a bygone era of oil prices above $100 a barrel”, Bloomberg wrote. The strike prices for some of the options were far from today’s prices, suggesting they may have been part of deals struck years ago.

Three of the 4 largest trades would profit if crude rises above $90, $95 or $125 a barrel by the end of this year. There were also rarely seen deep “in the money” options on the global benchmark Brent, that would allow the holder to sell crude at $80 a barrel. The contracts ranged from September this year to December 2020.

As Bloomberg concluded, while the transactions are small for Barclays, they’re much more profound for an oil market where banks are increasingly scaling back. Morgan Stanley, JPMorgan Chase & Co. and Deutsche Bank AG all reduced or exited commodities trading over the past several years, while Goldman Sachs Group Inc. was said to be reviewing its activities.

The counterpart(ies) on the Barclays trade remain unidentified.

Perhaps the best news from today’s book sale is that it concluded smoothly and without any major market impact, suggesting it was planned well in advance. The question is what would happen to the oil derivative market if a similarly-sized block hit the tape ad hoc and without prior warning. For the sake of the Fed’s “market stability” mandate, let’s hope we don’t find out.

via http://ift.tt/2tEUvON Tyler Durden

Authored by John Whitehead via The Rutherford Institute,

“Laws are no longer made by a rational process of public discussion; they are made by a process of blackmail and intimidation, and they are executed in the same manner.” – H.L. Mencken

Let’s not mince words.

Jeff Sessions, the nation’s top law enforcement official, would not recognize the Constitution if he ran right smack into it.

Whether the head of the Trump Administration’s Justice Department enjoys being the architect of a police state or is just painfully, criminally clueless, Sessions has done a great job thus far of sidestepping the Constitution at every turn.

Most recently, under the guise of “fighting crime,” Sessions gave police the green light to rob, pilfer, steal, thieve, swipe, purloin, filch and liberate American taxpayers of even more of their hard-earned valuables (especially if it happens to be significant amounts of cash) using any means, fair or foul.

In this case, the foul method favored by Sessions & Co. is civil asset forfeiture, which allows police and prosecutors to “seize your car or other property, sell it and use the proceeds to fund agency budgets—all without so much as charging you with a crime.”

Under a federal equitable sharing program, police turn asset forfeiture cases over to federal agents who process seizures and then return 80% of the proceeds to the police. (In Michigan, police actually get to keep up to 100% of forfeited property.)

This incentive-driven excuse for stealing from the citizenry is more accurately referred to as “policing for profit” or “theft by cop.”

Despite the fact that 80 percent of these asset forfeiture cases result in no charge against the property owner, challenging these “takings” in court can cost the owner more than the value of the confiscated property itself. As a result, most property owners either give up the fight or chalk the confiscation up to government corruption, leaving the police and other government officials to reap the benefits.

And boy, do they reap the benefits.

Police agencies have used their ill-gotten gains “to buy guns, armored cars and electronic surveillance gear,” reports The Washington Post. “They have also spent money on luxury vehicles, travel and a clown named Sparkles.”

Incredibly, these asset forfeiture scams have become so profitable for the government that, according to The Washington Post, “in 2014, law enforcement took more stuff from people than burglars did.”

In 2015, the federal government seized nearly $2.6 billion worth of airplanes, houses, cash, jewelry, cars and other items under the guise of civil asset forfeiture.

According to USA Today, “Anecdotal evidence suggests that allowing departments to keep forfeiture proceeds may tempt them to use the funds unwisely. For example, consider a 2015 scandal in Romulus, Michigan, where police officers used funds forfeited from illicit drug and prostitution stings to pay for …  illicit drugs and prostitutes.”

Memo to the rest of my fellow indentured servants who are living through this dark era of government corruption, incompetence and general ineptitude: this is not how justice in America is supposed to work.

We are now ruled by a government so consumed with squeezing every last penny out of the population that they are completely unconcerned if essential freedoms are trampled in the process.

Our freedoms aren’t just being trampled, however. They’re being eviscerated.

At every turn, “We the People” are getting swindled, cheated, conned, robbed, raided, pickpocketed, mugged, deceived, defrauded, double-crossed and fleeced by governmental and corporate shareholders of the American police state out to make a profit at taxpayer expense.

Americans no longer have to be guilty to be stripped of their property, rights and liberties. All you have to be is in possession of something the government wants. And if you happen to have something the government wants badly enough, trust me, their agents will go to any lengths to get it.

If the government can arbitrarily freeze, seize or lay claim to your property (money, land or possessions) under government asset forfeiture schemes, you have no true rights.

Here’s how the whole ugly business works in a nutshell.

First, government agents (usually the police) use a broad array of tactics to profile, identify, target and arrange to encounter (in a traffic stop, on a train, in an airport, in public, or on private property) those  individuals who might be traveling with a significant amount of cash or possess property of value. Second, these government agents—empowered by the courts and the legislatures—seize private property (cash, jewelry, cars, homes and other valuables) they “suspect” may be connected to criminal activity.

Then—and here’s the kicker—whether or not any crime is actually proven to have taken place, without any charges being levied against the property owner, or any real due process afforded the unlucky victim, the property is seized by the government, which often divvies it up with the local police who helped with the initial seizure.

In a Kafkaesque turn of the screw, the burden of proof falls on the unfortunate citizenry who must mount a long, complicated, expensive legal campaign to prove their innocence in order to persuade the government that it should return the funds they stole. Not surprisingly, very few funds ever get returned.

It’s a new, twisted form of guilt by association, only it’s not the citizenry being accused of wrongdoing, just their money.

Unsurprisingly, these asset forfeiture scams have become so profitable for the government that they have expanded their reach beyond the nation’s highways.

Any American unwise enough to travel with cash is now fair game for government pickpockets who are out to rob you of your cold, hard cash.

This is not freedom.

As I make clear in my book Battlefield America: The War on the American People, if the government can just take from you what they want, when they want, and then use it however they want, you can’t claim to be anything more than a serf in a land they think of as theirs.

It’s up to “We the People” to demand reform.

These injustices will continue as long as we remain silent.

In other words, make them hear you.

And if they won’t listen, then I suggest it’s time for what Martin Luther King Jr. called for when government doesn’t listen: “militant nonviolent resistance.”

via http://ift.tt/2twWOiP Tyler Durden

Jordan has just released the previously suppressed CCTV video footage of last year's heinous attack on 3 Green Berets by a Jordanian soldier and ISIS-sympathizer as they entered a desert facility to conduct training operations as part of a CIA secret program aimed at regime change in Syria.

Last week we reported the following:

"The Jordanian government had a strong incentive to gloss over the murders of the three Green Berets.  Likewise, the CIA was scared of potential blowback and the exposing of their covert program," says investigative journalist Jack Murphy, himself an Army special forces veteran.

 

A premeditated green-on-blue attack in Jordan outside of King Faisal Air Base (at al-Jafr in Southern Jordan) late last year resulted in the deaths of three elite US Green Berets in what the media initially dubbed a mere unfortunate gate incident and what the Jordanian government dismissed as a "a tragic accident devoid of any terrorist motives". But the whole event and subsequent attempts at cover-up just as Obama was leaving office enraged both the families of the slain and the US special forces community; and it further threatened to blow wide open the CIA's illegal Syrian regime change operation, called Timber Sycamore, which involved American special ops soldiers being tasked with training so-called "moderate" Syrian rebels in Jordan and Turkey as part of an inter-agency program.

 

As details of the court case involving the shooter continue to emerge this week, the media continues to misreport the true nature of the what the US special forces personnel were doing in Jordan in the first place, and how a CIA secret program put them at risk.

 

Last November the three Green Berets were entering King Faisal Air Base assigned as part of the CIA's 'Timber Sycamore' training. According to court testimony as well as evidence collected by the Pentagon, a soldier in the US-allied Jordanian Army opened fire as the Green Berets' convoy was stopped in front of the base. The Jordanian guard fired for six minutes, reloading multiple rifle magazines. The Jordanian government and media attempted to paint a picture that the approaching US convoy charged the gate and neglected protocol, and that the guard thought he was acting in self defense (a claim later retracted by Jordan). But initially suppressed surveillance footage captured the entire event, and confirms a methodical and willed attack as the Americans yelled in English and in Arabic, “We’re Americans! We’re friendly!" (the Jordanian military court refused to show the footage). As Foreign Affairs reported, "they were hunted down and executed at close range." A fourth US soldier was able to wound the shooter, bringing the attack to an end.

Watch the just released video (previously suppressed by the Pentagon, FBI, and Jordanian government) here:

Excerpt from the United States Special Operations Command 15-6 investigation report:

SUBJECT:

 

4 Nov. 2016 King Faisal Air Base Shooting AR 15-6 Investigation Summary

2
b. The Jordanian Air Force guard opened fire on the second vehicle of the convoy with his M-16 rifle, killing SSG Kevin McEnroe and mortally wounding SSG(P) Matthew Lewellen.

c. Within seconds of coming under fire, SSG James Moriarty and another Soldier exited the third and fourth vehicles in the convoy in order to seek cover as the shooter closed on their position. After unsuccessfully trying to communicate to the shooter that they posed no threat, the Soldiers returned fire. While the other Soldier maneuvered to gain a better position, SSG Moriarty stood and fired his pistol directly at the shooter, who was wearing body armor. After closing in on their position, the shooter shot SSG Moriarty twice mortally wounding him. SSG Moriarty’s actions enabled the remaining Soldier to maneuver and engage the shooter and seriously wound him.

d. SSG McEnroe died at the scene. SSG(P) Lewellen and SSG Moriarty were medically evacuated after receiving initial treatment at the local medical treatment facility but died en route to King Hussein Hospital in Amman. Autopsy results show that no amount of medical care could have saved these three Soldiers due to the nature of their wounds.

e. All team members maintained at least an intermediate language proficiency in Modern Standard Arabic. Prior to deployment, the teams conducted additional language training in Levantine Arabic, specialized weapons training, and advanced medical training.

f. There is no evidence that substantiates post-incident allegations and speculation that alcohol was involved, the Special Forces Soldiers were not complying with established procedures for entering the gate, or the Americans were the first ones to fire their weapons.

Read more about the circumstances behind the deaths of the Green Berets and the CIA program they were involved in here.

via http://ift.tt/2vCV5Kx Tyler Durden

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

This week’s expected House vote to add more sanctions on Russia, Iran, and North Korea is a prime example of how little thought goes into US foreign policy. Sanctions have become kind of an automatic action the US government takes when it simply doesn’t know what else to do.

No matter what the problem, no matter where on earth it occurs, the answer from Washington is always sanctions. Sanctions are supposed to force governments to change policies and do what Washington tells them or face the wrath of their people. So the goal of sanctions is to make life as miserable as possible for civilians so they will try to overthrow their governments. Foreign leaders and the elites do not suffer under sanctions. This policy would be immoral even if it did work, but it does not.

As Ron Paul relates…

Why is Congress so eager for more sanctions on Russia? The neocons and the media have designated Russia as the official enemy and the military industrial complex and other special interests want to continue getting rich terrifying Americans into believing the propaganda.

Why, just weeks after the White House affirmed that Iran is abiding by its obligations under the nuclear treaty, does Congress pass additional sanctions anyway? Washington blames Iran for “destabilizing” Syria and Iraq by helping them fight ISIS and al-Qaeda. Does this make any sense at all?

When is the last time Iran committed a terrorist act on our soil? It hasn’t. Yet we learned from the declassified 28 pages of the Congressional 9/11 report that Saudi Arabia was deeply involved in the 2001 attacks against Washington and New York. Who has funded al-Qaeda and ISIS in Syria for years? Saudi Arabia. Yet no one is talking about sanctions against that country. This is because sanctions are not about our security. They are about politics and special interests.

Why is Congress poised to add yet more sanctions on North Korea? Do they want the North Korean people to suffer more than they are already suffering? North Korea’s GDP is half that of Vermont – the US state with the lowest GDP! Does anyone believe they are about to invade us? There is much talk about North Korea’s ballistic missile program, but little talk about 30,000 US troops and weapons on North Korea’s border. For Washington, it’s never a threat if we do it to the other guy.

Here’s an alternative to doing the same thing over and over: Let’s take US troops out of North Korea after 70 years. The new South Korean president has proposed military talks with North Korea to try and reduce tensions. We should get out of the way and let them solve their own problems. If Iran and Russia want to fight ISIS and al-Qaeda at the invitation of their ally, Syria, why stand in the way? We can’t run the world. We are out of money.

President Trump was elected to pursue a new kind of foreign policy. If he means what he said on the campaign trail, he will veto this foolish sanctions bill and begin dismantling neocon control of his Administration.

via http://ift.tt/2uulpGx Tyler Durden

In the most vocal opposition to president Donald Trump yet, former CIA Director John Brennan said that if the White House tries to fire special counsel Robert Mueller, government officials should refuse to follow the president orders, as they would be – in his view – “inconsistent” with the duties of the executive branch.

“I think it’s the obligation of some executive branch officials to refuse to carry that out. I would just hope that this is not going to be a partisan issue. That Republicans, Democrats are going to see that the future of this government is at stake and something needs to be done for the good of the future,” Brennan told CNN’s Wolf Blitzer at the Aspen Security Forum, effectively calling for a coup against the president should Trump give the order to fire Mueller.

The exchange is 43 minutes into the clip below:

(Full transcript here)

Brennan appeared alongside his former colleague, Director of National Intelligence James Clapper, and both men who served in the Obama administration, told Blitzer they have total confidence in Mueller. “Absolutely. It was an inspired choice- they don’t come any better, ” Brennan said adding that “If Mueller is fired, I hope our elected reps will stand up and say enough is enough.” Some have responded with questions where Brennan’s devotion to the Constitution was in the aftermath of the events in Benghazi.

Falling back on his neocon roots, James Clapper, who has waged a long-running vendetta with Trump, once again warned about Russian interference in US affairs. When asked about the June 2016 meeting between Donald Trump Jr., Jared Kushner and Paul Manafort with a Russian lawyer and others, he responded: “I’m an old school, Cold War warrior and all that – so I have, there’s truth in advertising, great suspicions about the Russians and what they do. A lot of this to me had kind of the standard textbook tradecraft long deployed by Russians. It would have been a really good idea maybe to have vetted whoever they were meeting with.”

Clapper was also asked about Trump’s comparison of the intelligence community to Nazi Germany. Clapper said he called the President-elect nine days before he left the Obama administration saying he “couldn’t let that reference pass” and it was an insult to him, CIA Director John Brennan and the workforce. “That was a terrible, insulting affront, not just to me or John, we get paid the big bucks, but I’m talking about the rank and file, men and women, patriots and intelligence community — that was completely inappropriate and over the top – I had to do something about it.”

And so he did: on the call Clapper said Trump asked him to “to put out a statement rebutting the contents of the dossier which I couldn’t and wouldn’t do. It was kind of transactional” referring to a dossier that alleged ties between President Donald Trump’s campaign and Russia. It was not clear if he wouldn’t and couldn’t do it because the contents were legitimate, in his view, or because the dossier is what started the whole “Russian collusion” narrative in the first place. Curiously, Clapper saw it as a favor to Trump not to issue a statement: Clapper was asked by Blitzer why he didn’t put out a statement replying: “The whole point of the dossier by the way was we felt an obligation to warn him to alert him to the fact it was out there. That was the whole point.”

It was not clear if James Comey, whose subsequent leak to the NYT led to the appointment of Mueller, would have applied the same reasoning when asked by Trump to rebut the dossier’s contents.

via http://ift.tt/2urhyvD Tyler Durden

Och-Ziff Capital Management put a five-year-long investigation by Department of Justice and Securities and Exchange Commission to rest last year when it agreed to pay a $412 million fine to settle allegations that its Africa unit violated the Foreign Corrupt Practices Act by paying more than $100 million in bribes to corrupt government officials. But even after slashing its management fee following a wave of customer redemptions, the publicly traded hedge fund is in rough shape. Its shares are languishing around $3, well below their peak of $26, and investors have pulled nearly a third of their assets from the fund, which had $32 billion AUM in May, down from more than $50 billion at its peak in 2015.

With the firm in dire need of rebranding, Dan Och, CEO and chairman of his eponymous firm, announced a major management shakeup back in February hoping it would help revive the firm's battered image. While Och retained his titles, much of the firm’ day-to-day operations would be handled by Jimmy Levin, the former star of its credit business, who would take over as co-chief investment officer. Och personally contributed 30 million of his shares – about one-third – to Levin's $280 million incentive package, a massive sum that Bloomberg noted is a rarity in Wall Street today.

Jimmy Levin

But in a profile of the newly minted hedge-fund heavyweight published Monday, Bloomberg questions whether Levin’s appointment was a calculated bet, or a reckless gamble by Och, who is struggling to win back investors’ trust after the federal government accused him personally of ignoring red flags that could’ve prevented the corruption scandal.

“Inside the firm, some seethed. Outside, they sneered; the move smelled a bit of desperation. Five months later, that remains the burning question: Is this a Hail-Mary stab by Och to win back his seat of dominance in the hedge-fund universe or a stroke of genius?

 

‘It’s a bet he’s making, just as he was making on any of his investments,’ said Adam Kahn, a managing partner at the executive-search firm Odyssey Search Partners. ‘Dan probably likes the risk-reward in the package he’s giving to Jimmy,’ who has become ‘for all intents and purposes the succession plan’ at Och-Ziff.”

Levin is facing a “sizable” challenge in trying to turn around Och-Ziff. However, there’s at least one item on Levin’s resume that would appear to justify the promotion: Levin previously helped run the firm’s credit business. And while that might not seem like a sensible path to leadership at a firm known for its equities expertise, Levin's appointment comes as Och-Ziff is rapidly transforming into a fixed-income shop, according to Bloomberg.

“The challenge Levin faces is sizable: to reverse the merciless bleeding of assets – and defections of personnel — triggered by Och-Ziff’s misconduct in the Democratic Republic of Congo, Libya and other African countries. If Levin makes it happen, it’ll be because he’s successful in his push to remake Och-Ziff, a firm long dominated by equity trades, into something of a fixed-income shop. The firm now has half of its $32 billion in assets tied to credit, including dedicated funds that have cropped up in just the past few years.

 

'We certainly weren’t known as a credit shop when I first met with clients,' Levin said recently from an Och-Ziff conference room overlooking Central Park, recalling when he was a twenty-something on the road trying to convince investors to part with their money. “Those early meetings weren’t the easiest in the world.”

Levin made his first big play in the aftermath of the financial crisis, when he convinced his then-boss and now co-CIO David Windreich, to bet on battered mortgage-backed securities, and, later, Spanish regional debt, that paid off big for the firm. Under Levin, the firm’s main credit fund has notched average gains of 13 percent since its 2011 inception. In 2012, Levin’s credit trades accounted for $2 billion – more than half of the firm’s total gains that year, according to Bloomberg. Levin was named global head of credit in 2013.

Dan Och

Of course, Levin’s gains sound less extraordinary when one remembers that they coincided with an extraordinary bull run in credit that’s persisted since shortly after the crisis. As a trader during normal market conditions, to which the Fed is promising a swift return, Levin is largely untested, which begs the question, what portion of Levin’s achievements should be ascribed to luck?

Levin’s peers appear uncomfortable with the question, perhaps for fear it could reflect poorly on their own returns.

“Was it luck? I don’t know, maybe, I’m not sure it really matters,” said Mike Rosen, chief investment officer at Angeles Investment Advisors, who has put money into Och-Ziff’s credit-opportunities fund. “I do want to invest in lucky people – that’s better than investing with unlucky people.”

As for whether Levin deserves such an exorbitant pay package, his peers appear to have embraced the logic that, if Dan Och thinks he’s worth it, then he probably is.

“The $280 million pay package is, of course, a vote of confidence. “You pay people for what they’ve done, but you also pay people for what you think they’re going to do,” Rosen said. It’s also an important sign to investors that Dan Och is willing to do what it takes to keep Levin on board, according to Odyssey’s Kahn.

Of course, Och Ziff wasn’t just paying Levin for his talents; they were paying for his loyalty, too. Levin knew his hand when he bargained for the $280 million pay day amid a rash of employee defections, including the loss of three senior executives in March.

By taking payment in the company's battered shares, Levin is making a gamble of his own. And thanks to his incentive pay, if he can help push the company’s share price closer to $7 over the next three years, he stands to receive a potentially massive bonus.

“The deal: Levin was granted 39 million shares tied to performance; he has to stay for three years and the stock has to return 125 percent, including dividends, for him to score the full payout. If the shares rise the minimum of 20 percent, he’ll make $50 million.”

Still it remains to be seen if there’s anything the firm can do to reclaim its reputation as an industry powerhouse following the scandal, which also saw Och pay a personal fine of $2.2 million. Furthermore, some of the firm’s investors have questioned whether Levin was the right pick, complaining about his lack of experience and depth.

Levin brushes off these criticisms, saying he prefers to focus on investing.

“It’s not worth spending time wallowing,” he said. “It’s definitely been a challenging time, but to move forward we’re just focused on what we can influence, and that’s our investing.”

Whether Levin is sufficiently qualified for a leadership role at one of the world’s largest hedge funds is something only time will tell. But at the very least, thanks to his massive stock grants, Levin’s financial interests are 110% aligned with the firm’s. Levin’s incentive-pay package looks attractive, but where will those shares be when they vest?

The company’s other shareholders are probably wondering the same thing.
 

via http://ift.tt/2uuH0yJ Tyler Durden

Authored by PIMCO Global Strategist Gene Frieda via Project Syndicate,

Bond investors are from Mars, and central bankers are from Venus – or so suggests the bond market’s negative reaction to signals that the exceptional monetary-policy accommodation of the last decade is winding down. Risky asset markets, however, are ignoring the red flags that the bond markets are waving. Are they right?

Today, inflation remains low in much of the developed world. But previously dovish central banks in countries like the United States and the United Kingdom are itching to roll back the accommodative monetary policies that they have pursued since the eruption of the global financial crisis of 2008.

Inflation-targeting central banks assume that, when inflation expectations are stable, changes in inflation stem from changes in the amount of slack in the economy. When slack diminishes – as is happening now, with unemployment now well below average levels over the business cycle (and at multi-decade lows in the US and the UK) – inflation will eventually rise.

Already, these central banks have maintained loose monetary policies for much longer than in the past, in order to offset the headwinds to growth and inflation that the financial crisis produced. Yet they know from past asset bubbles that leaving monetary policy too loose for too long risks digging an ever deeper hole, with natural interest rates and potential growth ending up even lower in the next cycle.

So are investors in risky asset markets right to be so complacent? For now, there can be no definitive answer. But the record from past periods of calm suggests that, when cross-asset market volatility is low, de-risking is prudent.

To be sure, investors would have greater cause for concern if there were clearer signs of excessive risk-taking in financial markets and the real economy – the kind of excess that craves the monetary-policy punch. Because periods of asset-price euphoria – exemplified by the dotcom and real-estate bubbles of 2000-2008 – typically feature exceptionally loose monetary policy, central banks are now trying to extend the business cycle by removing monetary accommodation in a gradual and predictable manner.

But asset-price bubbles also tend to feature new innovations that entice markets and central banks into believing that this time really is different. In the post-crisis context, the most likely justification for higher asset-price valuations is the global decline in the “price” of savings (the natural rate of interest), or R-star. If corporate earnings grow as a function of trend growth (the underlying rate of growth), but funding costs remain a function of an even lower R-star, then equity multiples should be higher than in the past on a structural basis, and credit spreads should generally be tighter.

But, while this argument appears accurate today, investors have at least two reasons to be worried.

First, to the extent that the gap between trend growth and natural rates drives up asset valuations, marginal changes in that gap should lead to changes in those valuations. If central banks were simply altering short-term interest rates – the traditional tool of monetary policy – as they have done in the past, this would be less of a concern.

But, in the present cycle, central banks have become far more dependent on indirect tools – namely, long-term interest rates. The effects of such tools are shaped by investor expectations, and are thus prone to sudden and extreme shifts. In 2013, for example, the US Federal Reserve’s suggestion that it would begin to taper off one of its quantitative easing programs triggered a “taper tantrum,” with money pouring out of the bond market and bond yields rising substantially.

The second key cause for concern is that higher valuations do not necessarily mean higher returns or better volatility-adjusted returns. Even if the positive gap between potential growth and natural interest rates justifies higher asset valuations, lower potential growth denotes lower returns across asset classes. As interest rates rise toward the natural rate, financial conditions should tighten, and risky asset valuations should fall. Central banks want this tightening to come about gradually, but the brief history of unconventional monetary policy suggests that asset re-pricing tends to occur abruptly – sometimes disruptively so.

Why, then, don’t investors take advantage of extremely low volatility to buy cheap insurance? Markets do not explode every time volatility is low, but volatility has always been extremely low when markets have exploded. Insurance is needed most when imbalances become extreme. Equity and credit valuations are not cheap; but they are not egregiously expensive, either.

Here on Earth, central bankers and bond investors have something in common: both worry that the current period of extremely low volatility is neither sustainable nor desirable. After all, lower combinations of fixed income, foreign exchange, and equity volatility have been seen three times before: just prior to the onset of the global financial crisis, in the month preceding the taper tantrum, and in the summer of 2014.

In short, there is no doubt that volatility will eventually rise to normal levels. For investors today, the lesson is clear: reducing the scale of risk exposure is the right way forward.

via http://ift.tt/2uulo5v Tyler Durden

Venezuelan President Nicolas Maduro has made it clear: Nothing short of the invasion threatened by President Donald Trump will stop him from holding a vote on a new constituent assembly that will officially replace the country’s legislature and likely allow the embattled president to rewrite the country’s Constitution, cementing his grip on power.

According to Bloomberg, Maduro has said the vote will be held next week in defiance of threats of US sanctions, and calls by his opponents for a two-day general strike. If approved, the new assembly will replace the country’s previous opposition-controlled assembly, which was annulled by the Maduro-controlled Supreme Court in March.

Once approved, it’s widely believed that Maduro will stock the assembly with political allies who will enable the re-drafting of the country’s constitution, allowing Maduro to consolidate power and officially marginalize anyone who opposes his regime.

President Nicolas Maduro

In the face of mounting violence, opposition lawmakers are urging citizens to demonstrate at polling places in a last-ditch attempt to foil the vote. The death toll from street demonstrations demanding Maduro’s exit that have become a daily occurrence  in Caracas and other Venezuelan cities since they started in April recently topped 100.

“Deputy Simon Calzadilla, speaking for Unidad Democratica, urged Venezuelans to go to their electoral centers Monday at 10 a.m. to place protest banners and signs that say ‘in my voting place there won’t be a constituent assembly.’

 

Calzadilla, in an email, also asked citizens to rally to Caracas next Friday to “demand massively” that Maduro’s government halt the assembly vote.

 

If the regime doesn’t cancel this fraud by Friday, the party will inform of the actions it will behold on July 29 and 30, Calzadilla said in the statement. “Center by center, street by street, neighborhood by neighborhood to defeat Maduro’s proposal.”

The US has threatened “strong and swift economic actions” against the regime, which could force Venezuela into a default if the US stops buying hundreds of thousands of barrels of oil a day from the country. The creation of the assembly will enrage millions of Venezuelans who are fighting against the entrenchment of the Maduro regime. Unsurprisingly, Maduro is struggling with abysmally low approval ratings. In a symbolic vote, 7.5 million Venezuelans who participated in an unsanctioned ballot overwhelmingly voted against the assembly.

In the run up to the vote, violence against Venezuela’s political opposition is intensifying. On July 5, Venezuela’s independence day, a mob of pro-government thugs brutalized a group of opposition lawmakers who were protesting Maduro’s plans to hold a vote on the new assembly. The irony of this exercise in repression was probably lost on the Maduro regime, which denied involvement and condemned the attack.

Opposition member Simon Calzadilla

Frustrated by the rising death toll, some protesters are banding together to form militias, abandoning the strategy of peaceful protest espoused by the opposition and diving headlong into violent urban guerilla warfare. One Bloomberg reporter followed a would-be militia group during one of its meetings, where members created Molotov cocktails and practiced assembling their weapons.

The protesters were explicit in expressing their distaste for the president.

“The security forces they’re up against, the riot-helmeted troops shooting tear-gas canisters and water cannon and bullets? “They all deserve to die,” one of the bomb makers said flatly, dripping petrol into a jar.

 

The call to arms coming from some in the resistance may be the initial stirrings of the kind of urban guerrilla movement the country hasn’t seen in half a century. It’s too early to tell if they’ll follow through on their threats, but the bold talk is a troubling sign for mainstream opposition leaders who have issued instructions – pleas, recently – for peaceful rallies and marches. Those calls increasingly fall on deaf ears. Masked activists hurl their homemade bombs, rocks, jars filled with feces, anything they can get their hands on. They’ve stormed office buildings, shattered store windows and blocked roads.”

“We are tired of being killed,” one demonstrator who refused to show his face or give his name told Bloomberg. “We are willing to go out with guns, to face them as equals,” he said. “The protest must evolve.” The demonstrator claimed to be a teenager from a middle-class neighborhood – fitting the profile of many of the young men who’ve died in the demonstrations.

Collapsing oil prices and years of economic mismanagement led to Venezuela's economic collapse beginning when the price of crude plunged in 2014. It seems that the vote, which the opposition has already written off as hopelessly rigged, will one way or another lead to the next evolution of Venezeula’s rolling political and fiscal crisis – be it a revolution or bankruptcy. The country is struggling with, dwindling foreign reserves, bond yields as high as 36%, and looming payments on billions of dollars of oil-company bonds that were bought by Russia. Meanwhile, its citizens are struggling with hyperinflationary hell that has rendered dollars 1000x more expensive than they were in 2010.  

As we reported yesterday, Helima Croft, global head of commodity strategy at RBC Capital Markets, believes the country’s next crisis point will arrive by Christmas. But with much of Venezuela resembling the lawless Detroit from the movie RoboCop – public mobs routinely lynch suspected thieves, and gangs of bikers waylay merchants carrying commodities to market – it’s difficult to imagine how the situation could get any more dire for the country’s desperate citizens. The only options left for them, it seems, are to forcefully demand regime change, or pray that the price of oil moves back toward $100 a barrell.
 

via http://ift.tt/2tUDlrJ Tyler Durden